Rail Safety and Standards Board Ltd v British Telecommunications Ltd

In a conditional agreement, a defined requirement for a superior landlord’s consent must be given its natural and ordinary meaning. Where consent is defined by reference to specified licence documents intended to operate as deeds, an informal approval or indication is insufficient. Consent is not obtained until the documents have been delivered as deeds. Executed but undelivered documents do not bind the grantor. A contractual longstop termination provision operates according to its terms, subject to any express qualifications.

British Telecommunications Ltd agreed to grant Rail Safety and Standards Board Ltd underleases of two floors of a building, subject to obtaining the superior landlord’s consent to the underleases and proposed alterations.

The superior landlord’s solicitors held executed but undelivered licence documents while awaiting payment of fees. RSSB served notice terminating the agreement after the contractual date. The High Court gave judgment for BT, holding that consent in principle was sufficient and that completed licences were unnecessary. RSSB appealed. The central issue was whether the agreement required consent in the form of completed and delivered licences.

1. Appeal allowed. The High Court’s conclusion that the superior landlord’s consent existed before delivery of the licence documents was an error of law. The relevant facts were undisputed, so the characterisation of the position was open to correction on appeal.
2. The agreement was clear and unambiguous. Its words were to be given their natural and ordinary meaning. There was no drafting error or commercially unreasonable result requiring a different construction. This approach was consistent with Investors Compensation Scheme Limited v West Bromwich Building Society [1998] 1 WLR 896 and Rainy Sky SA v Kookmin Bank [2010] EWCA Civ 582.
3. The definition of Superior Landlord’s Consent required the superior landlord’s consent to be given by way of the specified Licence to Underlet and Licence for Alterations. Those documents were required to be in prescribed forms. Their detailed provisions, including covenants and conditions concerning the underleases and works, confirmed that the parties intended consent to take that specific form.
4. The licences were intended to be executed as deeds. Execution without delivery was insufficient. Until delivery, the superior landlord remained free to change its mind. The consent had therefore not been obtained when RSSB served its notice.
5. Clause 3.1 provided a clear cut-off date after which either party could terminate if consent had not been obtained, subject to clause 3.2 and any antecedent breach. The parties’ continuing obligations to procure consent did not make that arrangement unusual or uncertain.

RSSB’s notice was valid under clause 3.1. Order: Appeal allowed.

• Court of Appeal (Civil Division) allowed RSSB’s appeal and held that the superior landlord’s consent had not been obtained when the termination notice was served: [2012] EWCA Civ 553.
• High Court of Justice, Chancery Division, Mr Robin Knowles QC sitting as a deputy judge, ordered judgment for BT on 27 July 2011. Permission to appeal was granted.